Volvo chief Hakan Samuelsson said the company is shifting production of XC60 SUVs allocated for the U.S. from China to Sweden to avoid tariffs.
The effects of President Donald Trump’s tariffs on China are beginning to take shape — and it’s unlikely he’d hoped for this result.
Volvo Cars, which just opened a new plant in South Carolina, announced it would be shifting production of its XC60 SUV from China to … Europe. The move is to avoid the tougher tariffs currently in place on Chinese imports.
Trump has been pushing foreign automakers to build more vehicles in the U.S., and Volvo’s new plant in Charleston will build the S60 sedan, later adding a SUV to the list, but that won’t be until 2021.
The move by Volvo, whose Chinese parent Geely is positioning itself for a stock market listing, currently builds the ute in Sweden and China for European customers. The Chinese-built models are also shipped to the U.S. and other countries.
“We will of course reshuffle here and take XC60s for the U.S. … from our factory in Europe, and let China produce for other markets,” said Hakan Samuelsson during the call. He noted that the company was already making arrangements for the adjustment.
Volvo is moving production of its hot-selling XC60 from China to Sweden to avoid new U.S. tariffs on Chinese goods.
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Chinese-made XC60 already shipped to U.S. dealers would be reallocated to other markets including Europe, he said. The news of the production adjustment comes as groups of automotive advocacy groups are testifying before the Commerce Department.
The testimonies are part of the one-day public comment period related to President Donald Trump’s possible declaration of imported vehicles as harmful to U.S. security. If he deems them so, he can implement a sizable tariff – currently suggested to be 25% – on those vehicles without Congressional approval.
Automakers, suppliers and dealers have all come out against the increased tariffs whether as part of this new effort by Trump or through NAFTA. They all expressed displeasure with the new tariffs against China, which necessitated the production shift by Volvo.
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The new came as Volvo announced a second-quarter operating profit of 4.2 billion kroner, an increase of 28.6%, as well as a first half operating profit of 7.8 billion, a 15.7% jump and a new record. The record profits are coming as a result of record sales.
Volvo builds XC60 SUVs at its plant in Chengdu, China, as well as in Sweden.
Volvo reported record sales for the first half of 2018 of 317,639 cars, an increase of 14.4% compared with the same period last year. The robust first half performance places the company firmly on course to report another year of record sales for the full year. Volvo Cars reported sales of 571,577 cars in 2017.
All the key regions of the U.S., China and Europe reported steady growth during the six-month period, Volvo reported. Sales in China, Volvo’s largest market, were up 18.4% and in Europe they rose 5.7% led by the company’s SUV offerings.
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The U.S. grew 39.6% on the back of the bestselling XC60 and XC90. Overall volumes in the first half of the year were 47,622 compared to 34,102 in the same period last year. The increase comes as President Trump has been threatening foreign makers to produce more vehicles in the U.S.